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Capturing Alpha Opportunities with the Nasdaq Commodity Crude Oil Index

Capturing Alpha Opportunities with the Nasdaq Commodity Crude Oil Index

A volatile crude market has created many exciting trading opportunities for commodity traders. We recommend looking at calendar spread to track the trend changes in the crude market. In this paper, we selected seven examples when the calendar spread was relatively high and has flattened or reversed in the relatively short periods. Calendar spread usually compresses at the time when the spot price rebounds. So it’s not to our surprise that all of the seven trades are profitable. An interesting finding is that the Nasdaq Commodity Index (NQCI) was able to outperform the Bloomberg Commodity Index (BCOM) during five out of the seven trades. Moreover, with the higher the level of calendar spread and the higher the spot price appreciation, NQCI was more profitable than BCOM during the sample period from Jan. 2013 to Jun. 2018. We attributed the NQCI outperformance to the average shorter contract life that NQCI holds relative to BCOM during the upward spread compression periods.

Download the whitepaper "Capturing Alpha Opportunities with the Nasdaq Commodity Crude Oil Index" here.



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